Keywords: einvoicing, electronic invoicing, Eurozone, Auditel, Ernst & Young, Annual Working Capital Management Survey, supply chain, e-invoicing

Cost reduction in supply chain named a priority for 70% of UK companies

Susie West | News | 7 June 2012

• Print
•        

Almost 70% of UK-based companies have been forced to evaluate their costs and transform the supply chain because of the volatility of the eurozone and negative GDP growth.

An increasing number of businesses are looking for ways to stay afloat and Auditel reports that many are seeking the help of cost management consultants to help them reclaim unnecessary charges that have been made in the past and redesign their procurement processes to control costs.

Indeed, the trend has been supported by the latest Annual Working Capital Management Survey from Ernst & Young, which revealed that companies are reacting to the challenging market conditions by focusing on major inventory adjustments.

"Companies need to take their working capital performance to a whole new level," stressed Jon Morris, Head of Working Capital Management at Ernst & Young for Europe, Middle East, India and Africa.

"Many companies only really focus on working capital metrics at key reporting periods such as quarter and year-end and miss out on huge potential cash gains by getting into a monthly or even weekly rhythm."

A shared services network could be one way for businesses to spot these potential cash gains promptly, as well as reduce the costs incurred by manual and decentralised processes.

"Now's the time for companies to challenge their working capital performance and seek effective strategies to free up excess cash from the balance sheet to reduce net debt, fund growth or business transformation, or even return value to shareholders," Mr Morris added.

Ernst & Young's survey showed that performance stalled in Europe and improved slightly in the US. It also revealed that 2,000 of the largest companies in the US and Europe have a total of $1.2tn (£774bn) of cash unnecessarily tied up in working capital, equivalent to almost 7% of sales.

Yet there are some simple ways for companies to reduce procurement costs. e-Invoicing, for example, can help firms lower their costs per invoice, which is traditionally one of the biggest costs of finance departments.

Other findings of the survey showed 50% of European operations saw marked improvement in receivables and payables in 2011, compared to 42% of firms reporting improved inventory performance.